Uruguay awarded French gas and power group GDF Suez SA a contract to build a liquefied natural gas (LNG) re-gasification plant at an estimated cost of 1.125 billion dollars, the government said on Tuesday.

The plant to the west of the port of Montevideo will have a processing capacity of up to 10 million cubic meters of LNG per day. It will help diversify energy sources in Uruguay, which is completely dependent on oil imports, and supply the Argentine market.

The plant is expected to be operating by the first quarter of 2015. Initially, it will receive each year eight cargos with capacity of 150,000 cubic meters of LNG each.

“The recommendation is to award Suez the construction of the re-gasification terminal with a total investment, between the bidding process and other related work, of 1.125 billion dollars” Uruguay's Industry, Energy and Mining minister, Roberto Kreimerman, told a news conference.

Uruguay will pay the French company 14 million dollars a month during the 20-year concession.

Spain's Enagas, Norway's Hoegh LNG Holdings and a consortium formed by KoreaGas Corp and Samsung Heavy Industries Co had also submitted bids to build the plant.

The project will require building a breakwater and connecting the plant to the country's network of gas pipelines. The LNG re-gasification vessel will be rented at first but Suez will incorporate a new vessel during the project's second phase.

The terminal will have a storage capacity of 267 million cubic meters.

Uruguay consumes just 300,000 cubic meters of natural gas per day.

President Jose Mujica in his daily broadcast said the investment has the political consensus of all parties with representation in Parliament and “is more than justified since the cost of the last two droughts (in oil imports)” far exceeded the investment demanded for the new re-gasification plant.

Uruguay plans to export part of the LNG output to neighbouring Argentina, which has had to buy more natural gas from abroad to make up for dwindling resources at home. Argentina plans to secure about 80 LNG cargoes this year alone.

The re-gasification plant was one of several joint projects to develop between Uruguay and Argentina, as well as deep dredging of the access channels to the River Plate.

However the ongoing feet-dragging attitude of President Cristina Fernandez administration convinced President Jose Mujica that Uruguay should go on with the re-gasification project on its own.

Something similar happened with the dredging of the Martin Garcia channel that gives access to Uruguay’s main grains, oilseeds and pulp exports port, Nueva Palmira.

So far the maintenance of the channel has been undertaken by Uruguay but further deeper dredging is needed to ensure cargo vessels can sail fully loaded.

For this expensive undertaking however Uruguay must consult with Argentina since the River Plate is jointly managed by the two neighbouring countries.